Credit Counseling

If you are struggling to get out of debt, there are people out there who can help you to overcome your debt.  One such source of help is credit counseling services.  Good credit counseling services will work closely with you in order to help improve your understanding of what it takes to create an appropriate budget based upon your specific income, identify areas where you are overspending and how to limit that spending, give you tools to help create a more manageable budget, and provide emotional support to help you deal with the fact that you are facing monumental debt.

Many credit counseling services provide debt management programs (DMPs).  A debt management program is where the counseling service will work on your behalf and attempt to negotiate with your creditors on reducing interest rates, waiving late fees, and creating a more manageable monthly payment that fits more easily into your monthly budget.  The counseling service will also attempt to reduce the entire amount of the debt that is owed, but this usually takes place after the other negotiations are worked through, as the creditor is more likely to agree to the terms in those negotiations, since the creditor can still expect to receive the entire amount owed, even if it takes longer and there is less interest earned.

A debt management program is a useful service offered by most credit counseling services because a debt management program normally does not hurt your credit score, thereby enabling you to still be eligible for the lowest interest rates possible on future purchases of cars, homes, etc.  It is important to note that the use of a debt management program may be placed on your credit history, so future creditors could still know about it and use it as a basis of determining whether to extend credit to you or not.  However, using a counseling service’s debt management program is still a much better option than struggling to make larger monthly payments, dealing with higher interest rates, and being penalized with high late fees, not to mention having these all negatively impact your credit score.

The way this works is that you will make one monthly payment to the credit counseling company, who will then disperse those funds to all of your creditors.  To enact a debt management program on your behalf, you usually have to close all of your credit card accounts, thereby negating your ability to purchase anything via credit.  However, your creditors will no longer be calling you, and you’ll be on your way to eliminating your debt once and for all.  Still, even with a credit counseling company’s debt management program, it will still take on average between three to seven years in order to fully eliminate your debt.  The exact amount of time will vary based upon the total amount of debt you owe and how much money you are able to allocate toward your debt each month.

It is important to realize that there are both for-profit and non-profit credit counseling companies.  You want to avoid for-profit counseling companies because their companies are primarily in the business to make a profit, which could result in higher fees and fewer results.  Additionally, in some states, for-profit credit counseling companies are illegal.  Therefore, you want to find a non-profit credit counseling company.

To find reputable non-profit credit counseling companies, you should ask your family, friends, colleagues, and members of your church or community groups for recommendations of what non-profit counseling companies to consider.

Even after finding some non-profit credit counseling companies, you want to make sure that you know the various fees and services charged by each company.  The fees and services can vary, so you need to make sure you know exactly what you are getting from each non-profit counseling company you evaluate.  The fees are normally associated with the debt management plans that they establish with your creditors in order to repay the debt that you owe to your creditors.  Some non-profit credit counseling companies will waive the fees associated with the services they provide, so you should also take that into consideration when determining which non-profit counseling company you choose to help you manage and reduce your debt.

When you have a large amount of debt and cannot make any real progress toward eliminating that debt, you may feel as if you are all alone and have no one you can turn to.  This is not true, as there are credit counseling services that can aid you in formulating a budget and in providing a debt management plan that can reduce your monthly debt payments and eliminate late fees that can increase the amount you owe.  By carefully evaluating and choosing which credit counseling service to assist you with eliminating your debt, you can formulate a solid plan that will go toward eliminating your debt as quickly as possible and getting you back on the road to financial stability in your life.